Wilson Group, Inc. v. Quorum Health Resources

• Citation: 880 F. Supp. 416
• Decision Date: 21 March 1995
• Docket Number: Civ. A. No. 4:93-2768-22.
• Court: U.S. District Court — District of South Carolina
• Parties: The WILSON GROUP, INC., Plaintiff, v. QUORUM HEALTH RESOURCES, INC., successor to HCA Management Company, Inc., and Hospital Corporation of America, Defendants.

880 F. Supp. 416

The WILSON GROUP, INC., Plaintiff, v. QUORUM HEALTH RESOURCES, INC., successor to HCA Management Company, Inc., and Hospital Corporation of America, Defendants.

Civ. A. No. 4:93-2768-22.

United States District Court, D. South Carolina, Florence Division.

March 21, 1995.

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Saunders McKenzie Bridges, Lawrence B. Orr, Julie Berly Ervin, Bridges, Orr, Derrick & Ervin, Florence, SC, for plaintiff.

Stuart M. Andrews, Jr., Daniel J. Westbrook, Jonathon P. Dyer, Nelson Mullins Riley & Scarborough, L.L., Columbia, SC, for defendant.

ORDER

CURRIE, District Judge.

This is an action based on three causes of action: (1) breach of contract; (2) breach of contract accompanied by fraudulent act; and (3) Unfair Trade Practices Act ("UTPA") violations, S.C.Code Ann. §§ 39-5-10 et seq. The matter is before the court on (1) Defendant Quorum Health Resources, Inc.'s (hereinafter "Quorum") Motion for Partial Summary Judgment, (2) Defendant Hospital Corporation of America's (hereinafter "HCA") Motion for Summary Judgment, and (3) Plaintiff The Wilson Group, Inc.'s (hereinafter "Wilson Group") Motion to Amend Complaint. On July 20, 1994, both Defendants filed motions for summary judgment. The court heard oral argument on the motions for summary judgment on September 27, 1994, and took the motions under advisement. On November 14, 1994, Wilson Group filed a motion to amend the complaint to allege a negligence cause of action against Quorum for matters arising from November 12, 1991 forward. For the reasons set forth below, the court: (1) grants in part and denies in part Quorum's Motion for Partial Summary Judgment; (2) grants in part and denies in part HCA's Motion for Summary Judgment; and (3) denies Wilson Group's Motion to Amend Complaint.

I. SUMMARY JUDGMENT STANDARD

In deciding a summary judgment motion, the court must look beyond the pleadings and determine whether there is a genuine need for trial. Matsushita Electric Industrial Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). The court must determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Ins., 477 U.S. 242, 251-53, 106 S.Ct. 2505, 2511-13, 91 L.Ed.2d 202 (1986). If Defendants carry their burden of showing there is an absence of evidence to support a claim, then Plaintiff must demonstrate by affidavits, depositions, answers to interrogatories or admissions on file that there is a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986). An issue of fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for Plaintiff. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. An issue of fact concerns "material" facts only if establishment of the fact might affect the outcome of the lawsuit under governing substantive law. Id. A complete failure of proof concerning an essential element of a cause of action necessarily renders all other facts immaterial. Celotex, 477 U.S. at 322-23, 106 S.Ct. at 2552-53. Moreover, production of a "mere scintilla of evidence" in support of an essential element will not forestall summary judgment. Anderson, 477 U.S. at 251, 106 S.Ct. at 2511-12.

In other words, summary judgment should be granted in those cases in which it is perfectly clear that no genuine issue of material fact remains unresolved and inquiry into the facts is unnecessary to clarify the application of the law. McKinney v. Bd. of Trustees, 955 F.2d 924, 928 (4th Cir.1992); Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir.1979). In making its determination under this standard, this court must draw all permissible inferences from the underlying facts in the light most favorable to Plaintiffs. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 1356-57, 89 L.Ed.2d 538 (1986); McKinney, 955 F.2d at 928.

II. FACTUAL BACKGROUND

The following factual background is based on the current record before this court for purposes of summary judgment drawing all permissible inferences from the record in the light most favorable to Plaintiff.

This action arises out of a twelve-year contractual relationship between Wilson Group and Defendants. Wilson Group is a South Carolina corporation that owns and operates hospitals and clinics in South Carolina. Defendant Quorum is a Delaware corporation with its principal place of business in Tennessee and Defendant HCA is a Tennessee corporation with its principal place of business in Tennessee.

Wilson Group and Quorum began their contractual relationship on October 1, 1980 when they signed a five-year management agreement in which Quorum undertook to manage Wilson Groups' facilities.¹ HCA signed the agreement as guarantor.² On October 1, 1985, Wilson Group and Quorum entered into another five-year management agreement in which Quorum again undertook to manage Wilson Group's facilities.³ HCA was not a party to this agreement.

In a letter dated June 13, 1986, John L. Wilson, Executive Director of Wilson Clinic and Hospital⁴, wrote to Mr. Creighton Likes at Quorum:

As we have stated in the past, it is essential that Wilson Group and Quorum work very closely together to operate the Wilson facilities to our best possible advantage. The difficulties of an operation this size are great. The expertise required to run it obvious. This is the reason Quorum is here.

* * * * * *

Wilson Group feel strongly that revenue ... is being lost. These have been brought up in the past to the Quorum people at our hospital. We will discuss specifics at our next Executive Committee on June 24. It is our intention as a small privately owned business to maximize revenue and remain a top-notch ethical operation. This is not being done.

Quorum is your company and the focal point of your career. Wilson ... is mine. Through the management contract, Wilson ... must also be yours. During this period of transition with your leaving the Charlotte office, our receiving an excellent controller, and the other things which are always in a state of change, it is imperative that full support be given to us not only on the big issues, but the details as well....

As you well know, a hospital which is making a profit does not have the complaints which an unprofitable hospital has. We are in that area of unprofitability and attribute part of it to forces beyond our control. The other part, over which we do have control, is that which we are depending on you and Quorum for innovation, management and air tight control.

We are planning to use the June Executive Committee meeting to discuss this further. We also plan to let this be a starting point of unparalleled efficiency and profit maximization. It is important that everyone involve realize this and be prepared to do everything possible to achieve this end. There is no other way to approach this.

At the June 24, 1986 Executive Committee meeting, Mr. Likes gave an overview of the financial status of Wilson Clinic and Hospital and reviewed recent activities designed to correct current problems. John L. Wilson noted the organization's need for continued efficiencies and additional growth. He also distributed an article regarding recent recognition that Quorum had received regarding their dynamic growth within the health care industry and noted the need for that same type of dynamic innovation within the Darlington, South Carolina community. A short discussion followed concerning billing and suggestions for improvement and increased collection of patient billings.

In November 1986, Wilson Group received its consolidated financial statements and schedules and auditors' report for the fiscal year ending September 30, 1986 from its accountant, Peat, Marwick, Mitchell & Co. The consolidated balance sheet showed the Wilson facilities' net accounts receivable to be $1,230,558. The accounts receivable for the previous fiscal year had been $1,266,725. The auditors' report did not indicate whether this amount of accounts receivable was unusual.

At the November 25, 1986 Executive Committee meeting, James Worrell, Quorum's new financial controller of Wilson Group facilities, presented the Controller's Report. Mr. Worrell noted "that all facilities were doing well for the first month of the new fiscal year, showing good overall utilization trends and strong financial results." At the following month's Executive meeting, Mr. Worrell gave his report, noting that "bad debt appears to be moderating, giving the hospital a positive variance with respect to budgeted net income."

Due to the large accumulation and age of Wilson Group's accounts receivable, Quorum retained Ray Jordan, an external consultant. Mr. Jordan was to analyze the accounts receivable and determine how to improve collection efforts. There is no indication that Wilson Group requested that Mr. Jordan be retained. Wilson Group, however, had begun an in-house collection service at the Wilson Clinic and Hospital a few months earlier.

The next significant series of events between Wilson Group and Quorum began in 1990. At the July 1990 Executive Committee meeting, Mr. Worrell gave the Controller's Report noting that "utilization continued to be strong throughout the organization and that the operating results reflected this fact. He expressed optimism for the projected 1990 fiscal year end operating results." At the August, 1990 Executive Committee meeting, Mr. Worrell again gave the Controller's Report noting that "accounts receivable were being worked aggressively throughout the organization."

In September 1990, Mr. Worrell disclosed to John L. Wilson that he was having vendors' checks held. In December 1990, Mr. Worrell informed John L. Wilson ...